Vale rumour halts capesize Q4 rates fall
Average time charter rate firms, but concern remains over China
Jamie Dale - Friday 3 October 2008
AUSTRALIAN miners are expected to win a 10% price rise in negotiations for 2009-2010 iron ore contracts with Asian steel mills, rather than the 15% they had originally been seeking.
Rio Tinto Group and BHP Billiton won a massive 80%-97% price rise for its 2008-2009 contract, after successfully arguing for a freight premium to be paid which reflected the shorter shipping distance compared to Brazil.
Vale obtained a 65% price hike for the 2008/2009 fiscal year contract.
Merrill Lynch & Co said in a recent report that Brazilís Vale, however, may not get any increase in price next year from its Asian customers, assuming that it wins a planned 11%-11.5% rise for the remainder of the current contract period.
Freight Investor Services broker Ian Staples told Bloomberg yesterday that there was ďa rumour there may be a resolutionĒ between Vale and its Asian customers.
This level of speculation helped to support a 9.5% jump in the capesize fourth-quarter contract in yesterday morningís trading session.
The news also halted a nine-day slide in the capesize average time charter rate which gained $510 to $39,407 per day.
Chinese steelmakers, the largest consumer of iron ore, have previously said they would use more domestic supplies after Brazilís Vale halted some shipments amid price disputes.
This cast a further cloud over capesize demand, which had already struggled to find support after the Beijing Olympics, and led to a 65% fall in the average capesize time charter rate over the last month.
Meanwhile, Valeís investment programme suggests it remains confident about the future demand for its iron ore.
The Rio de Janeiro-based miner said it plans to spend just over $4bn to expand its ports in Brazil and boost exports of the raw material by 69%.
Iron ore export capacity at the Ponta da Madeira, Tubarao, Ilha Guaiba and Itaguai ports will rise to about 439m tonnes a year by 2012, from 259m tonnes now, Vale said.
Additional reporting by Bloomberg.